Businesses abandon Labor ship

Queensland’s business community has had enough. After decades of being the fastest-growing state with the lowest taxes and the envy of their peers in NSW and Victoria – many of whom made the move north to also bask in the economic sunshine – the past three years have been a shock.

While all states were affected by the slowdown in the global economy in late 2008, Queensland’s economy was hit particularly hard, especially the property and tourism sector, which are still struggling to get back on their feet.

The loss of the much-vaunted AAA credit rating in early 2009 was a crucial turning point for both the business community and Queensland voters in their attitude to the Bligh government. To be lumped on the same credit rating as the minnow states of South Australia and Tasmania was the final straw for many in the resource-rich state.

As Queensland prepares for a marathon eight-week election campaign ahead of the March 24 poll, the influence of the state’s key business leaders is demonstrated as they switch their allegiances to the Liberal National Party.

Business functions held by the LNP that used to be attended by dozens are now bursting at the seams as executives clamber to form a relationship with Liberal National leader
Campbell Newman
before a potential change of government.

While there is an element of backing a winner – with opinion polls showing the LNP are set to end 14 years of consecutive Labor rule – the loss of Queensland’s economic mojo has played a major part in the business community falling in behind Newman.

“What you are hearing most strongly from the business community in Queensland is the government has lost the strong relations with the business community that Beattie had. He knew you had to work with business to attract investment here," a Brisbane-based banker told the Weekend Financial Review.

“The whole approach now seems to be to delay project approvals. There is this attitude that business and investors are a nuisance.

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“That has really irritated the business community, who used to feel, not that they were favoured but they were listened to and projects and approvals were expedited. Now there’s almost an anti-business psychology within the public sector."

Queensland Premier Anna Bligh and her Deputy Premier and Treasurer Andrew Fraser – who drove through the $14 billion privatisation program – deny they have lost touch with the business community, but it seems to be a perception that’s stuck.

The loss of the AAA rating in early 2009 – the result of the Bligh government choosing to not cut back its big infrastructure spending – also resulted in punters taking a closer look at Queensland’s finances.

The halcyon days of the Beattie government, when budget surpluses of $3 billion plus were recorded each June, are long gone. Now state debt tops $85 billion and Queensland’s budget papers are a sea of red.

The $14 billion privatisation announced by the Bligh government only months after the 2009 election victory – the biggest since the Kennett government’s $34 billion sale of transport and electricity assets in Victoria in the 1990s – showed the precarious nature of the state’s finances.

The asset sales, which included the partial sale of iconic Queensland Rail as well as the Port of Brisbane and Abbot Point coal terminal, would never have been contemplated by the more cautious Beattie.

Beattie, who presided over Queensland’s glory days from 1998 until he stepped down in 2007, never had the need to sell assets.

His mantra was to keep taxes as low as possible, talk up Queensland every chance he had and attempt to lure business to Queensland with sweeteners such as the $10 million package for Virgin Blue to set up its Australian headquarters in Brisbane.

But the growing unrest with Labor’s inability to do something with their bumper surpluses and the belated realisation of Beattie that he better get cracking with building the roads, schools and hospitals for the fast-growing south-east corner was the beginning of the end of Labor’s close relationship with business.

Queensland executives are now lining up to have a crack at the Bligh Labor government over its approach to regulation, taxation and development approvals.

Even former Goss Labor government treasurer Keith de Lacy said Queensland had lost its low-tax mantle under the watch of Bligh and Fraser.

“Queensland used to be the low tax state of Australia and that is a status we have squandered in the last few years," De Lacy said on Friday.

“If a state is competitive from a tax point of view, it attracts more wealth and ultimately superior taxation revenue anyway."

Businesses that used to be able to lure workers to Queensland with promises of a better quality of life and cheaper housing have also lost that sales pitch. The cost of living – fuelled by rising electricity, petrol, water and property prices – has put Brisbane on par with Melbourne.

There has also been growing gripes about the level of regulation and the slow speed of development applications in both the property and resources sector. Businesses say they have had to cut back staff numbers while the bloated public sector continues to grow under Labor. Mining entrepreneur and
Linc Energy
chief executive officer
Peter Bond
says the time it takes to secure approvals for mining developments had tripled under the Labor government.

“The extended planning process doesn’t result in a better outcome for the community, it just means that companies miss out on economic opportunities," he says.

Both the property and mining sector have been slugged with new taxes under Labor in the past 12 months. Fraser scrapped the stamp duty discount of $7500 for existing home owners on their principal place of residence if they are buying a new home, in a move which will save almost $1 billion over the next four years. (The LNP says it will reinstate the discount.)

In the mid-year budget update earlier this month, the resources sector was hit with new charges for exploration leases and permits which will raise $344 million.

Mining-related infrastructure has also emerged as a critical issue for big business. The Bligh government has made a conscious effort to exit from the provision of infrastructure to facilitate the mining boom.

They have sold Abbot Point coal terminal and QR National, saying it’s up to the private sector to build new rail links and expand coal ports.

Derek Murphy
, an executive director of gas explorer
Icon Energy
, says productivity will continue to suffer until the state can address port and rail infrastructure bottlenecks.

He says major coal ports at Gladstone and Abbot Point, near Bowen, must be developed expediently. “It is time for a fresh approach to infrastructure. There are bottlenecks, particularly at the ports, and money needs to be spent in appropriate areas. We need to look up to 40 years ahead to see where the state is going," he says.

Fraser dismisses gripes about Queensland no longer being a good place to do business. He points to the estimated 35 per cent jump in business investment forecast for this financial year and the fact Queensland still has the lowest payroll tax rate (4.75 per cent) and a competitive stamp duty regime.

Taxation revenue per capita for 2011-12 is also $440 lower than the national average.

“On any measure we remain a low tax state," he says. “And given our private investment is a galaxy ahead of the nation and other states, I think we need to look at the facts and not anyone’s particular campaign grindstone."

Chamber of Commerce and Industry Queensland president Dave Goodwin says hikes to payroll and land tax have pushed many business owners to the wall and they are now looking for a change.

“They have had enough of the status quo and business have got to a point where they are prepared to take a chance on a change," he said.

Newman has made the right noises about cutting red tape and getting the state back on track, admittedly without any policy detail.

But business likes what it hears.

Back on the streets of Brisbane, the die-hard conservative supporters, who have endured a decade-and-a-half of Labor rule in George Street, are a bit bemused by the change of attitude. “People used to cross the road when they saw me and avoid eye contacts," laughs one prominent former conservative staffer now working in the private sector.